Apr 18 Startup vs Business Model

When you start a business, there’s a charged atmosphere.Everything feels new, daunting, exciting, nerve wracking; a whole cyclone of emotions, conversations and caffeine.

This is an easy time to romanticize, especially when you’re not directly involved.In movies, this is normally a montage, but you soon learn that this actually takes a long time, and you don’t get to skip ahead to the good bits.

I love startups, but having lived and breathed it, I see the time for what it is, and know the hidden challenges that sneak up on you.

You do everythingWhen I started working with Bessi and Paul (the TDi cofounders), TDi didn’t exist; it was still a work in progress.I was the first person they hired, and my job was essentially the old startup maxim: “Get Shit Done”.

You soon learn a valuable phrase, one I highly recommend for all the Gen Y’s reading this:

“I don’t know, but I will find out”

It’s ok not to know the answer to a question, but in startup you are responsible for finding out, there’s no one to handball to.

You have to quickly learn how to apply for grants, fix financial models, run workshops, meet with prospective customers, find out what sort of paint can be used on a kitchen floor, scrape and repaint the kitchen floor… and so on.

You need to like the people you work withThis is a time where there’s a lot of late nights, sudden surprises, emotional highs and lows, excitement and disappointment.The work is sometimes hard, but the sheer volume of work is what gets to you.

This is where culture matters.You get through (and even enjoy it) because of the people who surround you.

When your organisation grows larger, you won’t need to be personal friends with everyone, but when you’re small it’s a must.

Things change quicklyI vividly remember having a moment of frustration about five months in to launching TDi.

We’d been working hard on a project…and then suddenly we weren’t.

It turned out to be for a good reason too, the new plan made more sense.I remember turning to Bessi, and venting:“The hardest part of this job is that everything I work on is a 30-second conversation away from being completely redundant”

You spend hours, days, weeks on something, and then it becomes apparent that it doesn’t work. Something in human nature wants to “make the most of what we’ve done” and forge on.This is called the sunk cost fallacy, and it kills businesses.

Change is hardIt takes a while to get comfortable with it, but you can’t afford to get sentimental about your work, especially when it’s no longer the best way forward.

Building a business model that works is different.To have a model that can scale, you can’t do everything.In fact, you often need to step outside of the model altogether.

Think of it this way: If you yourself are the only person who can deliver the product/service, you haven’t built a business; you’ve built yourself a job.

One great tip from Ben Horowitz; before you hire someone, do the job yourself.That way you know exactly what’s involved and what characteristics are required for someone to master the role.This makes hiring much easier, and also gives you an appreciation for their work.

A business model needs to be able to work without the founding team.This means, it needs to run on teachable skills, rather than the unique background of the entrepreneurs.This way, you can plant a new branch in a different city, or even internationally.

The entrepreneur needs to become a master of teaching, rather than a master of delivering.

It also means learning how to build a customer base from scratch.How do you go from zero fans to 10,000 in a new city?How do you build a process of customer acquisition?That’s the skill of scaling, and it can’t be dependent on the founders.

Mistakes happen when we get these two stages confused.A startup is allowed to do things that don’t scale; in fact you have no choice.Building a model means creating processes that can be taught, and doing things that are repeatable.

Ask yourself; which stage am I in, and how can I make my business self-sustaining?